What is the penalty for Non-Appointment of Company Secretary under Companies Act 2013?

What is the penalty for Non-Appointment of Company Secretary under Companies Act 2013? . In this article, we will take you through the provisions of Section 203 of the Companies Act, 2013, which deals with the appointment of key managerial personnel, including the requirement for companies to appoint a whole-time Company Secretary, Managing Director, or Chief Executive Officer. The section aims to ensure proper corporate governance and compliance with regulatory standards by mandating the presence of qualified professionals in key roles.
Applicable Provisions
The case involves an appeal under Section 454(5) of the Companies Act, 2013, concerning the adjudication of penalties. The relevant rules include the Companies (Adjudication of Penalties) Rules, 2014. The matter was brought before the Regional Director (WR), Hyderabad, for consideration.
Facts of the Case with ROC and RD
Tethys Properties Private Limited, a company, was found to be in default of Section 203 of the Companies Act 2013. The appellants have filed the appeal under section 454 (4) of the Companies Act, 2013 against the MCA adjudication order dated 09.08.2024 passes by the ROC for violation of section 203 of the companies Act 2013 as the company and its directors had admitted that there was a non-compliance of provisions of above-mentioned section.
ROC observed that the company has not appointed the whole-Time company secretary as required under section 203 (1) of the companies Act 203 (1) of the companies Act 2013 r/w Rule 8A of the companies (Appointment and Remuneration) Rules 2014 for the period of 10.12.2014 to 07.03.2021 and 13.10.2021 to 30.11.2023.
The Registrar of Companies (ROC) imposed penalties for non-compliance, leading the company to file an appeal before the Regional Director (RD). The hearing was attended by the company's representative, a Practicing Company Secretary and contended that are:

Imposing maximum penalty by the ROC on the company, its director is burdensome on the company and directors.

Company was actually acquired in a CIRP proceedings dated 02.07.2019 and that the provision of 203 was attracted with effect from 02.07.2019.

COVID 19 pandemic effected the whole country and none shown interest despite company’s effort during that period to appoint a whole time CS/CFO/WTD

Company has not started its business and not a single rupee earned as on date and company is continuously incurred losses since 2019 to 2023.

That the default is unintentional and inadvertent and the same has been now made good.

Authorised representatives give reference to the order of NCLT that “while approving the corporate debtor sale as a going concern, without dissolution it is essential to see that the corporate debtor is not burdened by any past or unpaid outstanding liabilities prior to sale of the company as a going concern and the scope and object of the IBC is extinguish all claims specifically the one which were not even made during the CIRP or the liquidation stage to aid the purchaser to start on a clean state”.

Imposed Penalty
The ROC after considering the fact and circumstances of the case levied penalties. The penalty amount was determined based on the company's failure to comply with the relevant legal requirements. The details of the penalty, are as follows
For non-appointment of Company Secretary:
1. On Company: Rs, 5,00,000
2. On 2 past Directors: Rs, 4,38,000 each
3. On 1 past Directors: Rs. 4,46,000
4. On 1 Directors: Rs. 80,000
5. On 1 Directors: Rs. 5,00,000
Reduction in Penalty
Upon hearing the appeal, the RD reviewed the circumstances surrounding the non-compliance. The company’s arguments, including mitigating factors and potential rectifications, were considered. Consequently, the RD exercised its discretion to reduce the penalty amount to Rs. 1,50,000 for the company and by 10% of the penalty on all other individuals.
For non-appointment of Company Secretary:
1. On Company: Rs, 1,50,000
2. On 2 past Directors: Rs. 43,800 each
3. On 1 past Directors: Rs. 44,600
4. On 1 past Directors: Rs. 14,200
5. On 1 Directors: Rs. 8,000
6. On 1 Directors: Rs. 50,000
Any Benefit of Section 446B of Companies Act
Section 446B of the Companies Act, 2013, provides for lesser penalties in cases involving small companies and startups. However, in Tethys Properties Private Limited, concerned RD has already reduce the amount of penalties after considering all the facts and circumstances up to a great extent.
To conclude: - 
The case of Tethys Properties Private Limited highlights the procedural aspects of penalty adjudication under the Companies Act, 2013. While the ROC initially imposed penalties for non-compliance, the RD provided a reconsideration platform, leading to a reduction in the penalty. This highlights the importance of timely appeals and the discretion available under the law to mitigate financial liabilities in justified cases. Companies must ensure adherence to statutory requirements to avoid penalties while also leveraging available legal remedies for relief when necessary.
Download MCA Adjudication Order

In this article, we will take you through the provisions of Section 203 of the Companies Act, 2013, which deals with the appointment of key managerial personnel, including the requirement for companies to appoint a whole-time Company Secretary, Managing Director, or Chief Executive Officer. The section aims to ensure proper corporate governance and compliance with regulatory standards by mandating the presence of qualified professionals in key roles.

Applicable Provisions

The case involves an appeal under Section 454(5) of the Companies Act, 2013, concerning the adjudication of penalties. The relevant rules include the Companies (Adjudication of Penalties) Rules, 2014. The matter was brought before the Regional Director (WR), Hyderabad, for consideration.

Facts of the Case with ROC and RD

Tethys Properties Private Limited, a company, was found to be in default of Section 203 of the Companies Act 2013. The appellants have filed the appeal under section 454 (4) of the Companies Act, 2013 against the MCA adjudication order dated 09.08.2024 passes by the ROC for violation of section 203 of the companies Act 2013 as the company and its directors had admitted that there was a non-compliance of provisions of above-mentioned section.

ROC observed that the company has not appointed the whole-Time company secretary as required under section 203 (1) of the companies Act 203 (1) of the companies Act 2013 r/w Rule 8A of the companies (Appointment and Remuneration) Rules 2014 for the period of 10.12.2014 to 07.03.2021 and 13.10.2021 to 30.11.2023.

The Registrar of Companies (ROC) imposed penalties for non-compliance, leading the company to file an appeal before the Regional Director (RD). The hearing was attended by the company's representative, a Practicing Company Secretary and contended that are:

Imposing maximum penalty by the ROC on the company, its director is burdensome on the company and directors.
Company was actually acquired in a CIRP proceedings dated 02.07.2019 and that the provision of 203 was attracted with effect from 02.07.2019.
COVID 19 pandemic effected the whole country and none shown interest despite company’s effort during that period to appoint a whole time CS/CFO/WTD
Company has not started its business and not a single rupee earned as on date and company is continuously incurred losses since 2019 to 2023.
That the default is unintentional and inadvertent and the same has been now made good.
Authorised representatives give reference to the order of NCLT that “while approving the corporate debtor sale as a going concern, without dissolution it is essential to see that the corporate debtor is not burdened by any past or unpaid outstanding liabilities prior to sale of the company as a going concern and the scope and object of the IBC is extinguish all claims specifically the one which were not even made during the CIRP or the liquidation stage to aid the purchaser to start on a clean state”.

Imposed Penalty

The ROC after considering the fact and circumstances of the case levied penalties. The penalty amount was determined based on the company's failure to comply with the relevant legal requirements. The details of the penalty, are as follows

For non-appointment of Company Secretary:

1. On Company: Rs, 5,00,000

2. On 2 past Directors: Rs, 4,38,000 each

3. On 1 past Directors: Rs. 4,46,000

4. On 1 Directors: Rs. 80,000

5. On 1 Directors: Rs. 5,00,000

Reduction in Penalty

Upon hearing the appeal, the RD reviewed the circumstances surrounding the non-compliance. The company’s arguments, including mitigating factors and potential rectifications, were considered. Consequently, the RD exercised its discretion to reduce the penalty amount to Rs. 1,50,000 for the company and by 10% of the penalty on all other individuals.

For non-appointment of Company Secretary:

1. On Company: Rs, 1,50,000

2. On 2 past Directors: Rs. 43,800 each

3. On 1 past Directors: Rs. 44,600

4. On 1 past Directors: Rs. 14,200

5. On 1 Directors: Rs. 8,000

6. On 1 Directors: Rs. 50,000

Any Benefit of Section 446B of Companies Act

Section 446B of the Companies Act, 2013, provides for lesser penalties in cases involving small companies and startups. However, in Tethys Properties Private Limited, concerned RD has already reduce the amount of penalties after considering all the facts and circumstances up to a great extent.

To conclude: -

The case of Tethys Properties Private Limited highlights the procedural aspects of penalty adjudication under the Companies Act, 2013. While the ROC initially imposed penalties for non-compliance, the RD provided a reconsideration platform, leading to a reduction in the penalty. This highlights the importance of timely appeals and the discretion available under the law to mitigate financial liabilities in justified cases. Companies must ensure adherence to statutory requirements to avoid penalties while also leveraging available legal remedies for relief when necessary.